Chris B

The End of the End-of-the-World Trade

The "democratization" of the commodities trade that the author talks about was enabled by the expansion of electronic trading, low commissions, and low minimum investments into the commodities area. For the first time ever, an average guy watching Jim Cramer on TV in his bedroom could put his name on a contract to buy or sell a million barrels of oil, or tons of coal, or whatever, and then sell that contract later in the day from the comfort of his own home. In that way it was part 2 of the technology stock bubble. It allowed the dumb money and the fast money to enter the market and momentum-trade prices up until they eventually crashed. Supply and demand didn't matter any more for commodity investments than it did for tech stocks.

With taxes on LT capital gains and dividends at just 15% and every other option unattractive because of low interest rates and slow growth, who could blame the funds for trying their hand at the gamble?

These same circumstances will survive the bubble bursting, so the question is, will the bubble reinflate or will another investment class come along to captivate the day traders?